High-End Retailer May be Headed to Bankruptcy Again

According to Wall Street, Barneys of New York recently hired Kirkland & Ellis to renegotiate a $200 million revolving loan that matures in September 2012.  This fueled speculation that the retailer would be filing bankruptcy or even possibly closing its doors.

This would not be the first time that Barneys has been in bankruptcy.  In 1999, Barneys emerged from a 3-year bankruptcy, but it was still straddled with too much debt. 

Despite some financial troubles, the retailers name carries some wieght.  In 2004, Jones Apparel bought the company for $400 million and the 35-store chain soon became one of Jones Apparel’s top performing assets. 

In 2007, Istithmar, Dubai’s investment arm, succeeded in bidding for the retailer in a $942.3 million deal.

In 2010, Barneys hired new CEO Mark Lee, who was the former CEO of Gucci brand.  While market sources say that vendors like the new management and Barneys has been paying its bills on time, credit-checking firms are still giving Barneys a lackluster credit rating.  This, in turn, makes it more expensive, and maybe prohibitive, for Barneys to borrow more money.

Hopefully Barneys, whose roots date back to the 1920’s, will be around for many years to come.  There is good reason to believe so.  Indeed, representatives for Barneys claim that the retailer posted gains for fiscal year 2011.  It now just needs to deal with it’s long-term debt obligations.



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